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Green alts and ham

When Sam-I-am persists in pestering a grumpy grouch to buy a bag of alts, the grouch turns abusive and violent – teaching us all that we should buy and hold only bitcoin!

 

I am Sam

Sam I am

Do you like green eggs and ham?

 

I do not like green eggs and ham

I do not like them, Sam I am

 

Then… would you like to buy my alts?

They’re nice and tasty with some salt.

 

I’m already salty, Sam. 

Your altcoin shilling is a scam.

I’ve bought enough of all your alts,

The fact I have them is your fault!

 

Hmmm. But how about some XRP?

It’s oversold as it can be!

 

Sam. I do not want your XRP,

It’s going to crash as you can see.

And I already have a ton

Of worthless alts and that is one!

 

Well how about some Bitcoin Cash?

Some EOS, TRON, IOTA, DASH?

I know your bags are heavy, sir,

But take whichever you prefer!

 

Sam. I have them all (no BTC).

My bags are heavy as can be.

In fact you are the very reason.

You told me it would be alts season!

 

Ah yes, the alts will soon explode!

Back the truck up! Buy a load!

Don’t miss the train, it’s leaving soon.

And we’ll be going to the moon!

 

Your altcoins suck, you stupid clown

The only road they’re on is down.

And every time they try to climb,

Bitcoin spikes another time!

 

The perfect time to buy more cheap!

I really think you’d love a heap. 

I’ll do a deal on Doge or BAT

What would you say to one like that?

 

I think I have a better plan,

For where to put your altcoins, Sam.

Now turn around; this might feel wrong:

I’ll shove them back where they belong!

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Friday Inferno market update

TL;DR bump, bump, bumping on the ceiling.

 

Bitcoin is keeping traders on the edge of their seats, flipping from bullish to bearish and back repeatedly over the course of recent days. 

 

We have a collection of resistance factors in play in the same area, and bitcoin has now risen to meet these, backed off, and risen again several times. A strong move higher at the beginning of last week ran out of steam in the $12k area.

 

Firstly, there is the down-sloping resistance line that joins the year high of $13,880 with the next, lower high and then the more recent lower high. Then there’s the 23% fib level just below $12,400. Lastly, the $12k level is already an established support/resistance zone going back to 2017.

 

Bitcoin has ranged in the zone immediately above $11,500 all week now, with the bottom of that area marked by the 38% fib. RSI readings on the shorter-term timeframes have cooled off. While the daily is still high, it remains below 70. 

 

In summary, it’s on a knife edge. Bitcoin could go either way, and traders are waiting for the signal they need to take their position. Whichever happens, when it does go one way or the other, it’s likely to go hard.

 

There are reasons to be short-to-medium term bullish. Bitcoin Dominance continues to trend upwards, almost touching 70. The crypto world as a whole is expecting more from bitcoin and positioning accordingly. Meanwhile the key moving averages are slowly moving upwards, with the 50-day MA just under $11,000. These will act as further support as they rise.

 

But with bitcoin, you can never discount the wildcard, and there has been lots of stop-loss hunting going on, as suggested by the fast moves within a relatively narrow range. Bots programmed to push the market around to margin-call other traders have been at work, pending the breakout up or down. It’s quite possible we’ll see another major fakeout or shakeout – a big move up or down, followed by an opposite and even larger move. 

 

But this correction phase has now lasted over 6 weeks. We can expect resolution soon. $8,000 or $13,000–$14,000 is on the cards soon (and if you believe Max Keiser, $15k).

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Bitcoin Dominance at 70%, could hit 80%

Bitcoin now represents a proportion of overall crypto market cap not seen for two and a half years.

 

The bitcoin rally that started in April caught almost everyone off-guard. And while many of the community have experienced previous parabolic rallies, this one is different.

 

This time, all eyes are on BTC, right from day 1. In the past, the alts have often been dragged along for the ride – some gaining significantly in BTC terms, even as BTC gains in USD terms. The result has been a kind of leveraged increase. 

 

Take 2017, for example. A look at the Bitcoin Dominance chart shows what happened. The alts rally essentially had three stages. In the first, which started in March 2017, Bitcoin lost market share. Alts gained in BTC terms, going from around 15% of the market to over 60% just three months later. In the same period, bitcoin tripled in price from around $1,000 to $3,000. That’s (roughly) a 10x increase for alts.

 

Then there was a correction phase for the alts in BTC terms, as bitcoin’s rise accelerated. Over the next six months, Bitcoin Dominance rose back to 60%, as the #1 currency went into a parabolic rise. And then the final phase. Bitcoin topped out at $20k and money rushed into underpriced alts. By January 2018, Dominance was down to 33% as a result.

 

It’s been trending upwards ever since, the alts atrophying market share back to Bitcoin. And when bitcoin went parabolic earlier this year, it gained in Dominance too, just like in the second phase of the previous bull market.

 

Right now, Dominance stands at almost 70%. There’s no sign of it stopping yet, either. The direction of movement is very clear, and until the market has some sense that bitcoin’s long-term rise is ending, there’s no reason for money to go back into alts. Max Keiser has suggested that Dominance could hit 80% – close to its long term level, before the alts explosion of 2017. That would mean yet more pain for the alts, many of which are down at BTC lows, even if bitcoin’s rise has meant they maintain or gain dollar value.

 

The alts aren’t dead, like Keiser says, but many are on life support. It could be a long time, if ever, before they reach their all-time highs. Bitcoin is the king, and until it shows signs of stopping, that’s where the attention is. Given this rally is just a few months old, it could be a while to go yet.

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Litecoin halvening – what next?

Reduced block rewards for Litecoin miners raise questions for hashrate and price – with implications for Bitcoin’s own halvening next year.

 

Litecoin hit a major milestone earlier this week, with its third halving. Block rewards fell from 25 LTC to 12.5 LTC. Like Bitcoin, Litecoin halvings happen every four years, so the next one will take place in 2023. 

 

Litecoin is worth watching because it often signals what Bitcoin will do. It’s not exactly the same as Bitcoin, of course. But Litecoin is a large, well-established proof-of-work network, with a large trading community and high liquidity. So it’s a reasonable way of gauging Bitcoin’s future moves.

 

Litecoin has a total supply of 84 million LTC – four times the supply of Bitcoin. 63 million, or around three-quarters of these, have now been mined. With 12.5 new LTC being created every 2.5 minutes, that’s 2.6 million new LTC per year, or a little over 4%.

 

Litecoin and Bitcoin

Since block rewards are cut in half, it’s reasonable to expect some smaller miners to turn off their rigs – it becomes uneconomical to mine unless the price rises to compensate for the reduced supply. Just after the halving, Litecoin creator Charlie Lee tweeted,’Since the halving, 12 blocks have been found in 17 minutes. Seems like miners have not shut off their hashrate at all. Instead, we are mining at a rate of a block every 1.4 minutes on average, which is much faster than the expected 2.5 minutes. Litecoin network is healthy!’

 

It’s still early days, but can we gain a picture of what’s happening right now? And whether the same might occur for Bitcoin at its own Halvening in May 2020?

 

Firstly, price spiked around the halving itself, before dropping sharply. Overall, though, LTC is up over 200% in USD this year, even if it’s down in BTC terms.

 

Hashrate does seem to be holding steady. It’s still a little early to know for sure, but it appears that most miners have factored in the change. No doubt some will go offline in the coming weeks, but for now, little seems to have changed.

 

All of this suggests that miners and traders have been planning well in advance. The reduction in block rewards was priced in over a period of around 6 months. 

 

If we see the same for Bitcoin – if – then that looks like a major Christmas rally could be on the cards, and the network will remain strong post-halving.

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Inferno Tuesday market report

There have been big moves on the market with a rise above $12k – and Max Keiser predicting $15k this week.

 

Bitcoin has proven extremely strong this week, breaking multiple key resistance levels. On Saturday it pushed through the 50-day moving average. Yesterday, BTC broke the important $11.2k resistance zone, which marked the last lower high of this correction leg. There was a small correction when it touched the top of the downward-sloping resistance line from the recent high of $13,880, located around $12k, but this morning it broke through it convincingly.

 

The next target is the recent major high of $13,200, followed by a renewed attack on the year’s high and a break of $14,000. Max Keiser is optimistic, having predicted $15,000 is incoming.

 

Ideally, we need to see the daily candle close above $12,000 to make sure this isn’t a fakeout (as appeared to be the case yesterday). But bitcoin seems to have ended its correction stage, making a move higher on respectable volume. Right now the daily RSI is still below 70, meaning this leg of the rally may have a little further to go, before BTC retraces and/or consolidates.

 

Alt death

Of course, there’s a downside to bitcoin’s strength. Alts are atrophying market share to BTC. The King is just getting more and more powerful, and there’s no sign of Alts Season. Bitcoin Dominance stands at 69%, and has been trending upwards ever since the bull market started in April. Max Keiser predicts Bitcoin Dominance could hit 80%.

 

Meanwhile, there are shenanigans afoot in the global markets, which is likely helping to drive interest in BTC. Gold has hit a 6-year high on economic worries. The Chinese Yuan is at 10-year low, leading the US to brand China a ‘Currency Manipulator’. There’s evidence that Chinese citizens are buying BTC, to try to store value as the Yuan is devalued further.

 

Lastly, Litecoin’s halvening is today. Watch what happens closely with Litecoin, because it can be a signpost or early warning for what later happens with Bitcoin.

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Max Keiser – BTC could go to $15k this week

The perma-bull sees $100k per bitcoin in the medium-term future.

 

Max Keiser has been buying and promoting bitcoin since it was $1. The former Wall Street trader is big on gold and bitcoin, seeing the digital currency as the heir to shiny yellow metal. While Keiser’s long-term predictions for bitcoin are nothing new – he has repeatedly stated he expects $100,000 per BTC in the relatively near term, and has even entertained McAfee’s prediction of $1 million by the end of 2020 – this time, he has chosen a much closer target for his optimistic forecast.

 

On Saturday, Keiser tweeted, ‘I’m sensing #Bitcoin will cross $15,000 this week. Confidence in central governments, central banks, and centralized, fiat money is at a multi-decade low.’ He says he even spent another $10,000 on BTC, he was so confident.

 

The self-described ‘tweet poet’ later later explained, ‘Fiat chaos engulfing global economy. A perfect storm for #Bitcoin — up $1,000 since I mentioned earlier today; my gut feeling is, we see $15,000 this week.’

 

The background to this forecast is the mess of different factors pointing to serious problems ahead for the global economy. There are the trade wars between China and the US, which show no signs of abating; when Trump announced further tariffs on Chinese imports last week, the stock markets fell heavily. The Federal Reserve also cut interest rates, reflecting an adjustment in the light of slightly weaker growth prospects than expected.

 

Then of course there is Brexit, and the threat of the UK leaving the EU without a deal. This has increased sharply since Boris Johnson became the new Prime Minister, and it leaves the whole European trading bloc vulnerable. That’s to say nothing of the continuing problems in Venezuela and elsewhere in Latin America, or the threat from a nuclear North Korea.

 

Keiser is right; trust in centralised institutions is at a multi-decade low, and Bitcoin is a means to hedge and move wealth without them. He is known for his optimistic predictions about bitcoin, which do not always prove correct. On the other hand, he has also proven right about bitcoin’s inexorable growth since 2011.

 

Inferno’s conclusion? It could be a very bullish week for bitcoin, as the recent correction comes to an end. $15k feels like a little too much to us – but if it’s offered, we’ll take it.

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Sunday Inferno round-up

Here it is, folks: our regular Sunday summary of Inferno news, articles and market insights. Here’s what’s been going on this week:

We’ll be back with more tomorrow, so enjoy what remains of your weekend and stay tuned!

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Bitcoin Difficulty Ribbon

Willy Woo’s new metric shows when smaller miners are ‘capitulating’, typically in bear markets and after halvings.

 

Willy Woo is well known for developing chain-based indicators for Bitcoin, including NVT. Now he has released another: the Bitcoin Difficulty Ribbon.

 

You can read a full explanation here, but essentially the ribbon is a collection of moving averages that track Bitcoin Difficulty. Showing shorter-term and longer-term moving averages on the same chart gives a sense of the ‘flow’ of Difficulty, as more miners come on board or, at times, are forced out of business. The result is a kind of twisting ribbon effect, which tightens (or turns downwards) when miners are feeling the pinch, and fans out when times are better.

 

Small and large miners

This is important, because not all miners are the same. Smaller miners are typically worse-placed to weather falling bitcoin prices, while large miners have both more cost-effective set-ups and greater resources to survive a crunch. The least efficient miners need to sell most of their coins to stay afloat, and are vulnerable to a supply shock (halving) or bear market.

 

The ribbon shows the rate of change of Difficulty. It’s very clear what happens and when. During major bear markets, the ribbon compresses because smaller miners are going out of business and hashrate is falling, leaving stronger miners who have more of a cushion against such a squeeze. That means more coins going to miners who don’t need to sell as many – so they accumulate, new supply falls, and the cycle starts again with more bullish action.

 

Halvings

What’s really interesting is that we can see miners capitulating in both bear markets and just after halvings. Obviously, dropping supply by 50% is enough to put many miners out of business. If miners are selling most of their coins to pay for electricity and can’t hold on until price catches up, they will fold. That has happened after both halvings to date, and we can expect it to happen again next year.

 

Woo uses this chart to make a comparison between the current bull market and 2012’s bull market. ‘Notice how the 2019 the 2012 bull market have the same structure, we saw severe mining capitulation (i.e. the ribbon flipped negative), the resulting vacuum in selling pressure lead to a shorter accumulation band before price breakout. Thus this bull market resembles 2012 more than 2016 structurally.’

 

The next halvening, in May 2020, may offer a strong buying opportunity. For now, the ribbon shows the bull run is just getting started.

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Friday Inferno market update

TL;DR Onwards and upwards!

 

Bitcoin has been stuck in a short-term bearish phase for the last month, since topping out at $13,880. That may have finally changed yesterday when BTC broke above key resistance.

 

Over the past few weeks we have seen a succession of lower highs, with the last around $10,200. Bitcoin put in a higher low – just – on Sunday, when it held the $9k level. Now, it has put in a higher high and followed through. At the time of writing, BTC has touched a recent high of $10,584 before pulling back.

 

Volumes aren’t as high as we’d like to see just yet, so we’ll be keeping an eye on those in case this is a fake-out – in which case, it’s reasonable to expect a lower low to be incoming, down below $9k.

 

For now, bitcoin is trading well above the 21-day EMA. It found resistance at the 50-day MA, which it will need to break soon to maintain momentum. RSI on the daily is just above 50 and heading up, while on the 4h it is well into the overbought zone, suggesting that BTC may need to consolidate or correct a little here before its next leg up.

 

Overall, the picture is good. July was the first month since January that closed in the red – again, a necessary move in any sustained uptrend. Assuming this correction phase has lasted 5-6 weeks and the price of BTC dropped a maximum of 35% ($13,880 down to $9,050), that would be entirely in line with other early bull market corrections, notably in November 2015 and June 2016, both of which were around a 40% drop.

 

For a little more bullish context, we’ve seen the following this week:

  • Transactions on the Bitcoin network are on track to reach an all-time high this year
  • 85% of all BTC have now been mined, with coin number 17,850,000 being mined yesterday.
  • A new indicator from Willy Woo, the Bitcoin Difficulty Ribbon, suggests the bull run is just starting (more on this tomorrow).

 

However, it turns out that – despite being widely reported – LedgerX has not started offering physically-backed bitcoin futures. The Commodities Futures Trading Commission (CTFC) chief communications officer Michael Short, even took the step of emailing CoinDesk to clarify, ‘LedgerX has not yet been approved by the Commission.’

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LedgerX launches physical bitcoin futures…

…beating the long-awaited Bakkt to the punch. What effect will this have on the market?

 

LedgerX has managed to come in ahead of Bakkt, launching its physically-settled bitcoin futures product yesterday. The company received the required licence from the relevant US regulator, the Commodity Futures Trading Commission (CFTC), back in June. Bitcoin futures will be available for anyone on LedgerX’s Omni trading platform.

 

Physical vs cash-settled

Physically-settled futures are the next big thing for the crypto space. Existing futures, such as the ones provided by CME (which launched in December 2017), are cash settled. This means they’re really only paper contracts. No bitcoins are bought or sold, which means there’s minimal impact on the underlying market.

 

With physically-settled futures, the positions are settled on the real bitcoin market. The trader receives BTC rather than USD – which means any demand is passed through to the same market that regular crypto traders are using.

 

The launch makes LedgerX the only US regulated spot and options exchange for Bitcoin. The site states, ‘We offer a range of strikes from $2,000 to $50,000 for terms that expire out to 2020.’

 

That’s pretty cool, because you can deposit BTC and take a punt on where the market is likely to be a year from now. Unless something goes hideously wrong, there are going to be a lot of crypto-savvy traders who are very happy about that.

 

Bitcoin collateral

In LedgerX’s case, you can actually pay for your positions with bitcoin, too – therefore totally circumventing the banking system. Ordinary retail traders can sign up, deposit BTC, take a position and be paid out in BTC at the end. 

 

This makes LedgerX a little like BitMex, only without the shady liquidation hunting and insane 100x leverage. Plus you can use USD to fund your account. Plus Nouriel Roubini isn’t spearheading a campaign to have LedgerX’s CEO hauled off in handcuffs.

 

All eyes are still on Bakkt as a conduit for major institutional money, but LedgerX aims to serve both the retail and institutional market. Bakkt is expected to launch within the next two months, pending final regulatory approval.

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